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How do you understand our system of government functions? Maybe along the lines of this. The public votes for MPs. They legislate on bills. If a majority is achieved, the bills become law. Statutes is maintained by the courts. Simple as that. Well, that’s how it used to work. Not anymore.

The Rise of Shadow Arbitration Panels

Nowadays, international firms, along with the oligarchs who own them, can sue governments for the regulations they pass, at offshore tribunals made up of corporate lawyers. Such disputes are conducted away from public scrutiny. Differing from national judiciaries, these panels grant no opportunity to appeal or oversight by judges. You or I cannot take a case to them, and neither can our government, or even enterprises based in this country. The door is open exclusively to corporations based overseas.

If a tribunal rules that a legislative action could harm the corporation’s anticipated profits, it may order compensation of hundreds of millions of pounds, even billions.

These awards are based not on actual losses but funds the tribunal officials decide the company might otherwise have made. The state may have to abandon its policy. It becomes discouraged from enacting future policies along the same lines, worried about being sued.

A Process Running Rampant

Historically high figures of disputes are being filed, as firms observe each other, and investment funds bankroll lawsuits for a share of a cut of the awards. The outcome? Sovereignty and popular rule are now unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can supersede domestic law and the rulings made by parliaments is that this clause has been inserted – without public consent, and often in an atmosphere of profound opacity – into international trade agreements.

A Specific Instance: The Whitehaven Coalmine

Last year, activists secured a significant win at the senior court. The judge determined that schemes to open the first major coal mine in the UK for three decades, in Cumbria, had been wrongly permitted by the Conservative government, which had endorsed the bizarre claim that the mine would have no consequence on climate commitments. The incoming administration then withdrew the permission the Tories had issued. Now, this success faces being overturned by an secret arbitration panel answering to no one but the corporations filing the suit.

During August, a firm whose ultimate owners are based in the Cayman Islands initiated proceedings versus the UK government. The previous week a arbitration panel in the United States was convened to hear it.

The claimant is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no idea how much this could amount to. What legal team is representing it challenging the state? A sitting MP, and former attorney-general in the Conservative government, the self-proclaimed patriot Sir Geoffrey Cox. The administration enacts a policy, the high court validates it, then a foreign company contests it through an undemocratic offshore tribunal, and a member of our parliament represents its behalf.

An Oligarch's Lawsuit

Simultaneously that the tribunal on the coalmine case was appointed, information emerged from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. Details are little of the case to date, but it is highly possible that he’ll use the ISDS mechanism to contest the restrictions the UK enacted against him subsequent to the invasion of Ukraine. He has started suing a small nation for this reason, seeking a colossal sum: an amount representing half state's yearly income. Included in the lawyers representing him there? a prominent lawyer, married to the former British prime minister.

Legal experts argue that the EU’s procrastination in leveraging immobilised Russian assets as collateral for its loan to Ukraine is due to concerns within Belgium that it could be taken to court in the ISDS tribunals, under a investment pact. This remarkable, unaccountable authority over sovereign states might be preventing the funds Ukraine critically depends on.

Empty Promises and Growing Costs

The public was told that such things were not possible. Years ago, a senior politician, championing the most significant and hazardous of all investment pacts, told us: “The UK has signed trade deal after trade deal and there has never been a issue in the past.” An expert on this matter accused critics of “alarmism … in reality, ISDS does not affect the UK much”. The general impression appeared to be that only poorer nations should be concerned by ISDS claims. Warnings that “once firms start to realise the influence bestowed upon them, they will shift their focus from the poorer states to the wealthy nations” were met with scepticism.

That threat has come to pass. Recently, fossil fuel and resource corporations have initiated a record number of claims against nations both wealthy and developing, challenging – similar to the Whitehaven project – official measures to halt climate breakdown. Firms have thus far won one hundred and fourteen billion dollars by using ISDS, of which energy giants have secured eighty-four billion dollars. That equates to the combined GDP